Committed to establishing a deep-water LNG hub, Petronas deploys its second FLNG, and holds annual licensing round to further exploit its oil and gas resources
LNG is part of the clean energy transition and Malaysia is looking to develop its stranded gas resources to support that effort, evolving into an LNG hub in Southeast Asia.
Underpinning that effort is floating LNG (FLNG) technology. Petronas is the only energy company with two FLNG vessels. First gas was recently produced from deep water at the Rotan and Buluh fields in Block H off Sabah, by operator PTTEP Sabah Oil Limited. Produced in 1,100 m of water, Malaysia’s first deep-water gas project has a target production capacity of 270M standard cubic feet per day (scfd).
The first gas from the project was received by Petronas’ second floating LNG vessel PFLNG Dua for liquefaction and export as LNG on 15 February. Expectations are that PFLNG Dua will deliver its first LNG cargo by mid-March.
Commenting on the start-up of PFLNG Dua, Petronas vice president of LNG asset Zakaria Kasah noted that despite the challenging conditions presented by Covid-19, “We commissioned this megastructure and achieved first LNG production in seven days upon the first gas in. This is a record achievement, and a great milestone for Petronas and the LNG industry.”
Capable of reaching gas fields in water 1,500 m deep, PFLNG Dua has the capacity to produce 1.5M tonnes of LNG annually. Using the FLNG vessel, Petronas envisions transforming Sabah into a regional LNG deep-water hub.
Of course, Petronas is an old hand at FLNG technology, employing PFLNG Satu – the first FLNG vessel – to produce LNG from the Kanowit gas field offshore Sabah in 2016. It was redeployed to the Kebabangan field offshore Sabah in 2019.
Petronas calls PFLNG Satu “game-changing technology” for its ability to be flexibly deployed and unlock remote and stranded gas reserves, producing LNG hundreds of kilometres offshore.
Still a major exporter of LNG, Petronas reported delivering 11,547 LNG cargoes from the Petronas LNG Complex in Bintulu, and 10 LNG cargoes from the PFLNG Satu in 2020.
|Project three-year outlook for OSV demand|
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Malaysia offers blocks
In a push to further develop its offshore oil and gas resources, Malaysia offered 13 exploration blocks during its annual licensing round, held in February. Malaysia Bid Round (MBR) 2021 drew interest from some 250 potential investors from North America, the UK, Europe and the Asia Pacific, who joined a live stream of the event.
Out of the 13 blocks offered, three are situated in the Malay basin (PM340, PM327 and PM342), four in the Sabah basin (SB409, SB412, 2W and X) and the remaining six are located in Sarawak basin (ND3A, SK4E, SK328, SK427, SK439 and SK440). Included in blocks PM342, SK4E, SK328 and SB409 are six discovered fields for investors to explore more and help accelerate monetisation.
Additionally, MBR 2021 offers four deepwater blocks (ND3A, 4E, 2W and X) off the coast of Sarawak and Sabah which saw prominent exploration discoveries in recent years.
To sweeten the pot for investors, Petronas unveiled incentives through three new Production Sharing Contract (PSC) terms. The first is the Enhanced Profitability PSC Terms (EPT) which will be applied to nine shallow-water blocks, out of the 13 blocks offered. The EPT terms are formulated to provide more attractive returns in the current challenging market conditions. The new Small Field Assets (SFA) and Late Life Assets (LLA) PSC Terms introduced recently were also developed based on market feedback to provide opportunities for industry players with niche capability to extract greater value from discovered resources and LLAs.
“Petronas remains committed to maximising its oil production as a cash generator”
Furthermore, other non-fiscal enhancement enticements for potential investors are larger block sizes, flexible bidding options (e.g. the option to merge two adjacent blocks under one PSC), transferable minimum work commitments between two adjacent PSCs and phased exploration periods.
At the same time, MBR 2021 offered investors three large areas for study. First is the area to the south of the Malay Basin in Peninsular Malaysia, with Pre-Tertiary and basement emerging plays yet to be explored. The second and third areas cover the deepwater of north of Luconia that extends north easterly to Sabah, which could extend proven plays.
Petronas senior vice president of Malaysia Petroleum Management (MPM), Mohamed Firouz Asnan said: “As an industry, we need to continue with exploration activities to seize the immense opportunities that the energy transition presents. If we don’t, we would then position ourselves out of the new energy equation.”
Investors will be able to use a virtual data room until 6 August 2021 to conduct data room reviews anywhere and anytime within the bid-round period. Subsequently, the bid evaluation exercise is expected to take place between August and September 2021. Petronas plans to award the PSCs to successful bidders before the end of the year.
|Three-year outlook for offshore rig demand for Malaysia|
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Outlook for Malaysia
In the Petronas Activity Outlook 2021-2023, Petronas outlined its requirements for offshore support vessels and drilling rigs for the next three years. In 2020, there were as many as 23 drilling rigs active, with peak utilisation in March, but this fell to just 14 in the second half, impacted by the Covid pandemic and the slump in oil. The state-owned oil company sees a steady outlook for the next three years, with 21 jack-ups, semi-submerisbles, and tender-assisted drilling rigs required in 2021 as Petronas remains “committed to maximise its oil production as a cash generator while producing gas to meet customers’ demand, within its allocated capital investment,” said the company.
Marine logistics activity during 2021 will generate demand for 131 offshore support vessels – anchor-handling tug supply vessels, platform supply vessels, fast crew boats, utility vessels and landing craft. By contrast, 138 OSVs were required in 2020.